The euro dropped to a 17-month low on Monday, falling 0.7 per cent, as fiscal worries in France dragged the single currency down. French markets are under growing pressure from high debt levels and political gridlock ahead of next year’s presidential election.

The gap between French and German bond yields is widening, raising fears that the turbulence could spread across European markets. The dollar charged higher at the euro’s expense, supported by still-high US Treasury yields even after a weaker-than-expected American jobs report cut expectations of a Federal Reserve rate hike this month.

Investors now see less than a 20 per cent chance of a Fed hike in October, though a December move remains firmly on the table. European stocks were set for a strong start despite the currency slide. In Asia, Japan’s Nikkei rose 2.5 per cent while the 30-year Japanese government bond yield hit a record high ahead of remarks by Prime Minister Sanae Takaichi.